There are two ways to look at this, and frankly, only one of them involves long-term survival. The better version is that digital is finally starting to replace physical on the global stage, and heralding a freshly-laid bottom for recordings. The other version – espoused by analysts like Mark Mulligan – is that downloads in the post-iPod smartphone era aren’t growing aggressively enough. Couple that with tanking physical and penny-producing streaming platforms, and the second version is far less rosy.
So which version do you subscribe to?
A look at the latest financials for Universal Music Group suggests some bottoming out, for a number of reasons. The earnings picture was rocky during the last quarter, with the EBITDA (a complicated earnings calculation) slipping nearly 27 percent to 82 million euros ($102 million).
In fairness, that’s still a profit (if you believe Vivendi’s limited accounting disclosures), and during the first nine months of this year, EBITDA dropped a milder 5 percent to 238 million euros ($303 million).
The revenue picture is better: on the year, the company has raked in 2.9 billion euros, or $3.7 billion, a manageable 3.4 percent decline at constant currencies. This is the last quarter before UMG’s financials get melded with those of EMI, and it looks like a managed collapse.
The question is what the next status quo looks like. At present, major labels still have the ability to blow up superstars on a global stage. They can still turn acts like Rihanna and Black Eyed Peas into a worldwide asset, and they still have a lock on powerful, traditional radio. They can even spend $1.4 million to break an artist, and still get a return… at least for now.